Gold Posts Gains, US PMI, Housing Releases Miss Expectations

Gold has recorded considerable gains on Monday. In the North American session, the spot price for XAU/USD is $1232.15 for one ounce. On the release front, Chicago PMI dropped sharply to 47.6 points, while Pending Home Sales declined by 2.5%. On Tuesday, the US releases ISM Manufacturing PMI.

It’s been a slow start in 2016 for the US economy, with soft growth and employment numbers in comparison with the red-hot numbers which characterized the second half of 2015. This was underscored on Monday, as PMI and housing numbers were very soft. Chicago PMI slipped to 47.6 points in February, compared to 55.6 points a month earlier. Weak housing numbers continue to raise concerns, as Pending Home Sales posted a sharp loss of 2.5% in the January report. This reading comes on the heels of New Home Sales, which slipped to 494 thousand in January, compared to 544 thousand a month earlier. This figure was well short of the estimate of 522 thousand. Weakness in the US economy has been a boon for gold prices, as nervous investors continue to seek safe assets and avoid risk in uncertain economic times.

The US economy has been grappling with a downturn in global demand, which has taken its toll on the export and manufacturing sectors. However, there was some positive news late in the week. US Preliminary GDP for the fourth quarter posted a strong gain of 1.0%, well above the estimate of 0.4%. There was also positive news from the manufacturing sector, as durable goods sparkled. Core Durable Goods rose 1.8%, crushing the estimate of 0.2%. This marked the key indicator’s strongest showing since March 2014. Durable Goods Orders followed suit with a sharp rise of 4.9%, rebounding from the previous reading of -5.1%. This was stronger than the estimate of 3.0%.

XAU/USD Fundamentals

Monday (Feb. 29)

9:45 US Chicago PMI. Estimate 52.1 points. Actual 47.6 points

10:00 US Pending Home Sales. Estimate 0.6%. Actual -2.5%

23:30 US FOMC Member William Dudley Speaks

Upcoming Key Events

Tuesday (March 1)

10:00 US ISM Manufacturing PMI. Estimate 48.5 points

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Monday, February 29, 2016

XAU/USD February 29 at 12:45 EST

Open: 1221.33 Low: 1219.50 High: 1235.92 Close: 1232.15

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1191

1205

1232

1255

1279

1303

XAU/USD posted gains in the Asian session. The pair has been choppy in the European and North American sessions.

1232 remains busy and is under strong pressure

There is resistance at 1255

Current range: 1232 to 1255

Further levels in both directions:

Below: 1232, 1205, 1191 and 1175

Above: 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged, consistent with the lack of movement from the pair. Long positions retain a slight majority (53%), which is indicative of trader bias towards gold moving to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

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